Future links between structural reforms and EU cohesion policy

Original publication: September 2018
Authors: Robin HUGUENOT-NOEL, Alison HUNTER, Fabian ZULEEG
Short link to this post: http://bit.ly/2NINlCs
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The European Union (EU) is facing wide-ranging challenges, such as mitigating climate change, defining a common strategy to address migration flows and strengthening the security of its citizens. At the same time, the EU must deal with new risks induced by a changing global environment. On the one hand, rising protectionism across the globe, Brexit and the looming prospects of a global trade war have the potential to create new challenges for the EU project. In this context, strengthening the resilience of the Economic and Monetary Union (EMU) – whose architecture remains incomplete – is essential. On the other hand, another wave of industrial transformations (based on ‘megatrends’ such as digitalisation, the acceleration of innovation, or heightened sustainability concerns) is expected to raise disparities across EU’s territories. As a result, the geographical concentration of discontent, combined with the rise of nationalism across the continent, could also threaten the EU’s integration prospects.

Today, there is growing consensus that European economies mustreform to respond to these new, structural challenges. In May 2017, the European Commission proposed to realign its funding priorities for the period 2021-2027 to more effectively support member states’ efforts to align national reforms with new EU priorities. Building on the Structural Reform Support Programme (SRSP), introduced in the period 2017-2020, the Commission suggests introducing a new funding tool, the Reform Support Programme (RSP). The RSP would support the design and implementation of structural reforms (SR) in member states. Its proposed budget is EUR 25 billion. Financially, it constitutes a hundred-fold increase in comparison to the SSRP.

There is also general agreement that the effectiveness of EU instruments aimed at increasing the implementation of SR could be improved. But the debate about the ultimate goal of structural reforms remains open. While some argue that these should focus on reducing macroeconomic imbalances that may negatively impact the EU’s growth prospects, others consider that they should be focused on reducing regional disparities or enhancing social inclusiveness. A critical element of the post-2020 MFF debate is to assess the extent to which the EU’s new structural reform agenda will be able to modernise the European economy while empowering EU citizens in territories adversely impacted by the acceleration of globalisation and the advent of a new phase of technological change.

This study draws on desk research, semi-structured interviews and findings of a previous study published by the European Policy Centre (EPC) in November 2017. It examines whether and how the Reform Support Programme could most effectively complement Cohesion Policy (CP) in its objectives of strengthening economic, social and territorial cohesion in the EU.

Our research has identified three significant challenges in this regard:

The negative legacy of linking Cohesion Policy to SR, as highlighted by the negative reception of the macroeconomic conditionality (MEC) mechanism introduced in the 2014-2020 programming period;

A lack of clarity on the ultimate aim of structural reforms and remaining uncertainties related to the kind of structural reforms that member states should prioritise;

A possible mismatch between CP priorities of reducing regional disparities and promoting social inclusion and the RSP’s focus on reducing macroeconomic imbalances.

In this study, the authors suggest that the negotiations on the 2021-2027 Multiannual Financial Framework will require Cohesion Policy to (i) demonstrate more clearly the added value of the Policy in delivering on new EU priorities; (ii) achieve more with reduced funding; (iii) participate in the defence of EU’s core objectives and values. In this context, the authors point to possible policy alignments between the rationale for the introduction of the EU’s structural reform support agenda and objectives traditionally pursued by cohesion policy. These include developing more resilient societies, promoting social inclusion, or fostering economic convergence. There are, however, also risks that this agenda could adversely impact other CP objectives, such as reducing regional disparities in the European Union.

To provide stronger complementarity between these agendas, the authors of this study recommend:

Providing a stronger narrative for EU SR support by integrating the SR agenda with a more explicit rationale for how it supports the aim of empowering EU citizens in a new global environment;

Showcasing how CP can complement the EU’s SR agenda by demonstrating the added value of CP’s tailored approach in boosting EU economic, social and territorial resilience;

Ensure that the SR support agenda considers EU cohesion goals including by encouraging stronger support from EU member states to those adversely impacted by structural changes in the economy;

Build a multi-level governance structure for the EU’s SR agenda by defining the respective roles for each level of governance (EU, national, regional and local) in delivering on the EU’s SR agenda.

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